Tuesday, March 23, 2010

What if The Poor Aren't Just Like You and Me?

A perennial approach to poverty is to look at the poor as people just like regular people, who merely have a lack of resources. Sociologist and economists have taken this tact for years, because it seems condescending to do otherwise. In the early 20th century, Franz Boas started the standard meme that any child can become scientist, beggar, priest, or whatever. The corollary seems to be the Axiom of Equality: every group (race,income,religion,language,age,sex) has the same distribution of every phenotype given the same environment (except sex organs and melanin content). Thus ,the homeless are just people without homes, the poor simply people without money. Indeed, many homeless and poor are this way.

Yet, most poor in the US are not simply those just like us without money (note: 'most' does not mean 'all'). The poor in most developed countries have disproportionately lower self-control and IQs, and these traits are somewhat hard-wired; a higher teacher-student ratio probably won't turn Cletus Spuckler's spawn into yuppies. There actually isn't a Genius in All of Us. It is and has been conventional wisdom that traits like intelligence and self-control are themselves a function of wealth or some other environmental root cause. Here are two conventional, well-known economists (Glenn Loury and Sendhil Mullainathan) seemingly discovering this conventional wisdom as if they just created a paradigm shift.

It's as if no one ever tried modeling the poor as being resource constrained, but instead economists have always assumed they are stupid or lazy. Nothing could be further from the truth. Further, the idea of providing welfare to the poor to rectify the situation has been tried, and is still there, and you can see its results in most urban American cities. We don't expect responsibility and so we don't get it, as opposed to what Glenn states, which is that all we do is preach self-responsibility to these poor ciphers of social forces. I suppose, like international aid, he thinks a doubling of expenditures would surely do the trick.

I say, let's actually try the stupid and lazy approach. It hasn't been investigated by economists for the reasons Sendhil mentions (its depressing and seemingly mean-spirited). After several decades, isn't it worth a couple top-tier pubs? A handful of tenure posts? Isn't is possible this may have some relevance?

The purpose isn't to make us feel morally superior, but rather, to design more effective remedies, to help the poor be all they can be, which may not be equality. It would be nice to our egalitarian instincts if everyone latched onto some socioeconomic achievement as if they were shot out of a randomizer, but what if that's not possible? What does that imply for policy? Is does not imply ought, but it does constrain what is possible, and highlights what is futile. If we treat the poor like MIT undergrads without wealth, and they don't respond as such, this only helps those who selfishly or naively preen about their moral righteousness, and the journalists and policymakers who think this line of thinking is novel.


Anonymous #5 said...

I read a challenge to the marshmallow experiment here:


You were making a very broad claim about income and self-control, and yet I knew exactly where your "self-control" link would lead to. Just an observation.

Anonymous said...

You could do observational studies of lottery winners. There's an example of poor people who suddenly become wealthy. (Lottery players are typically poor and so lottery winners are typically poor.) I haven't seen any data along these lines but I have heard that a surprisingly large proportion of lottery winners go bankrupt within a couple years.

Anonymous said...

The purpose of welfare isn't to raise the poor out of poverty, it's to decrease the risk exposure of the middle and working classes to an adverse life event. By reducing risk, you reduce peoples' tendency to save, which results in increased velocity of money, which is considered by many economists to be a good thing. Eliminating the social safety net may be counterproductive (don't tell me about Chile; they didn't have a social safety net to begin with and they actually are building one now that they can afford one) to economic growth in that it may lead to increased savings rates beyond what it considered optimal. Japan is a prime example of even a small increase in life uncertainty leading to massive increases in savings and prolonged economic depression.

There is definitely abuse of welfare, and definitely bureaucrats who encourage such abuse, but the institution of welfare is central to any advanced economy. Not everyone has a trust fund, which is unfortunately something you can't relate to (well, I guess it's fortunate for you!) ;)

As for someone on welfare who is just milking the system, are they *really* stupid? I mean, they've figured out a way to survive with zero expenditure of energy, which is pretty much the goal of most working folks (ie to be independently wealthy). Lazy, yes. morally compromised, definitely (of course, reading your essay entitled "Using IP to Create a Noncompete" reveals you to be just as morally compromised, if not moreso). But to view those people as stupid while pushing for reform of welfare is to vastly underestimate your opponent.

Anonymous #5 said...

Also, I wish I had my copy of the Bell Curve handy, because there is a graph in there somewhere that basically indicates that a single mother with a genius IQ will probably be poor. Putting aside the question of how "scientific" the graphs in that book are, I found that graph, well, interesting. The text drew no conclusions that were inconsistent with the broader ideology of the book.

Anonymous said...

To Anon @ 556pm: what happens when the country can no longer afford it's welfare state?

Eric Falkenstein said...

I wrote that IP as a Noncompete article after being of victim of that nefarious tactic, which was very damaging to me. I wanted to expose how easy it was to damage someone with baseless accusations. It's a travesty, and shameful, and I'm probably the last person on earth to think it is a legitimate tactic.

And if you know where my trust fund is/was, please let me know.

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J said...

Imagine you are an Australian economist and that evil Boas never existed. What do you deal with the Aboriginals?

(1) They are as they are and cannot be made like us. You establish reserves where they can boomerang kanguroo and practice dream religion.
(2) You break up their families, take the young and spread them among the general population, hoping that they will be absorbed.
(3) You grant them some kind of monopoly like mining rights or gaming licences that assure them steady income.
I cannot think of anything else. It has been all tried and nothing seems to work.
If nothing is done, the market will surely deal with them as it ultimately always does with entities that have lost their competitive edge.
Any suggestion?

Anonymous said...

Read Theodore Dalrymple's latest book (Second Opinion, only published in the UK I think) - it's an account of his working life spent dealing with the poor in England. It's not just about money, that's for sure.

Nick Gogerty said...

Most individuals have a range of potentials, these potentials can be realized or not based on nutrition education etc. For example in the developing world Vitamin A and or Iodine can add an extra 10-20 IQ points in areas where they are deficient.

I think the trick is to acknowledge the potentials of individuals, similar to amartya Sens model of capabailities and to try and maximize those potentials.

The tabula rasa argument of an individual is flawed.

Another danger is self fulfilling arguments where depending on a message received by an individual they may respond in kind by varying from their mean potential. Limiting potentials is in no one's interest, but blind optimism also does few favors.

stephen said...


I listened to this yesterday and kept thinking of you, particularly when they were discussing the usefulness of behavioral econ. with respect to asset pricing. Do you think behavioral econ. will lead to anything useful, or just wind up being a rehash of a lot of the stuff prior to the seventies? Thanks.

Wenger J Khairy said...

Thanks for your video tutorial. The best explanation of utility, CAPM and APT.

Best regards from a Malaysian
(in Singapore)

Anonymous said...

It's a moral decision that needs to be made through the political process.

The Fed acts as the lender of last resort and is a safety net for Wall Street because of the moral complexities of allowing the entire economy to go into the tank just to punish a few bankers. The same way that we have a social safety net which put an absolute floor on poverty because of the moral complexities of allowing children to starve in the streets just to punish the parents for lacking self control and a trust fund.

Pick your poison, I suppose, but if your position is that the Fed should bail out the financiers, but let the poor starve, I strongly disagree.

Anonymous said...

They are just like the rest of us. It was proven in the film "Trading Places".

Anonymous said...

It's as if no one ever tried modeling the poor as being resource constrained, but instead economists have always assumed they are stupid or lazy.

Because this is a essentially a psychodrama where our academics see themselves as are challenging the status quo. They alone care about the poor and have the answer. They really don't see that their ideology is the dominant hegemony. That can't admit that their solutions have been tried time and again because then they would have agree that their solutions don't work.

Instead they have to pretend that the institutions and the academy, dominated by people who think exactly like them, and responsible for enacting their solutions, are somehow perverted by Fox News.

Anonymous said...

perhaps its not self control, it is just distrust of authority?

IQ is not like height. It is very subjective. Arguments that involve IQ generally say more about the arguer than the subjects' IQ measurements.

And lots of migrants were poor before they migrated, and are rich now. Eg Jews from Russia, Pakistanis, etc etc

Anonymous said...

Jews and Italians immigrating to the US are feeble minded. That was one of the scientific nuggets used to justify the 1920s immigration law that kept made my relatives immigrate somewhere else.
Here's why: Living in warm climates makes people stupid and lazy. Cold weather makes people resourceful. So Northern Europeans are the smartest. We must change our immigration laws to favor preserve the existing ethnic mix (thought Calvin Coolidge).